Hello, I am Law Denning and I am a practising solicitor in a High Street practice. I have been an expert on this website in UK law since 2008. During that time, as you appreciate, I have answered thousands of questions from satisfied users on a variety of subjects. Because we are all in practice with clients and court and other users, I might not always respond in minutes, particularly evenings and weekends. Please bear with me in that case

It is my pleasure to try and assist you with this today. Please bear with mewhile I gather some further information from you in order for me to be able toadvise you fully.

Unless I have all the facts that I need, my answer would not be accurate.

There are 3 of us, 2 are brothers. We are setting up a company and doing a shareholders agreement. Nothing amazing, we are all friends etc...my only concern is this, can i limit the voting power of the 2 brothers? I am concerned that they may decide one day to outvote me. I have 50% of the company as I am inputting the intellectual property etc...the 2 brothers have 25% each.

In which case you need both directors service agreements and shareholders agrements.The shareholders voting doesnt need to be covered as it is already taken care of in the numbers of shares which are 25,25,50.

Sorry for late reply. So when you say The shareholders voting doesnt need to be covered as it is already taken care of in the numbers of shares which are 25,25,50. Are you saying that the brothers who have 25% each cannot outvote me?

Hi my colleague asked me to respond. If you have a 50/50 deadlock then you cannot be out voted as shareholder and they cannot remove you from the board but the company is potentially deadlocked. At board level you will be able to be outvoted and management is in the hands of the directors. Two solutions

either have A and B shares and give your shares say the A's 2 votes for everyone of their on certain resolutions such as to remove or appoint a director - that will give you control; or

provide for a list of things that cannot be done without your consent or if more politically acceptable without the consent of all the shareholders.

I am afraid shareholders agreements tend to be complex and difficult to get properly balanced

That is clearly intended to be structured so that any 2 can outvote the third ( ie you can be outvoted) regardless of underlying economic interest. This is unnecessary as there are three board members so the management is not deadlocked. Ask them why they think this is necessary. It suggests they are operating as a team and you would become effectively a minority

You would need to have a list of things that can only be done with consent of all three but you could still be removed a s director unless you provide that on a vote to remove you , your shares have more votes.

You could just provide that you are entitled to remain a director whilst you have shares.

Bear in mind however that whatever a shareholders agreement says you cannot overrule the powers under the companies act so for example a simple majority of votes can remove a director even if it would be a breach of contract.

I noticed from the paperwork that out of 2000 allocated shares, fully paid, it states 105 have been issued. If you total the shares allocated to all 3 of us, it totals 103. Please forgive me for this, does this mean that there are 2 shares outstanding that have not been declared?

Sounds like it yes. There should be a return of allotments filed at companies house to show what shares have been issued. Also the company should have a shareholders register that shows who owns what. It could be a mistake if there were subscriber shares which are the ones signed up to by the promoter of the company but are often never issued.

It has been a pleasure. You can always post follow up questions or send questions marked for my attention.

Just so you are aware the experts are independent of the site and we are not always on line - most are practising lawyers. I am in fact travelling a lot over the next few weeks so may not always be available. I will always respond eventually but I though I should mention this.

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